A change of pace: An earnings improvement strategy for your practice

Issue February 2011

In today's weak economy, most lawyers feel as though they are losing control over many of the factors that influence profitability. Clients are wielding newfound power over pricing and staffing decisions, not to mention slowing down payments. New clients are harder and harder to come by as competition among law firms has increased. And despite modest improvements in busyness in late 2010, most law firm partners find they are still less busy than they would like to be or need to be.

Yet even in a recession, there are concrete strategies to improve productivity levels and profitability that are available to almost all lawyers. By changing the approach to the backlog and the pace at which assignments are worked, it is possible to be more efficient and more profitable without selling additional work to new clients.

Pace determines volume

How busy a lawyer is during any period is a measure of how many assignments are worked on in a given period of time. Weekly time reports, monthly profit and loss statements, and annual earnings records are all tied to accounting periods with specific start and end dates.

Partners can effectively increase their productivity by accelerating the pace and tempo of the practice, i.e., pulling some amount of billable work across those accounting boundaries from the future into the present. In essence, the partner commits to doing a little of next week's work this week, a little of next month's work this month, and eventually a little of next year's work this year.

The pace at which a lawyer works the assignments in the backlog is both fluid and elastic. Everyone has experienced proof of this by recording more billable time than normal the week before a vacation. Why? Some of the work needs to be done soon, and so it is completed before leaving.

The same result would follow if the average lawyer were told that in two weeks, they would be staffed on the biggest case of their career. Billable time would spike between now and then as the lawyer worked through the backlog to "clear the decks" for the upcoming plum engagement.

The elasticity of the pace of the practice also works in reverse. If a lawyer is preparing for a trial in two weeks and the case suddenly settles, there may no longer be enough work to keep the lawyer feeling busy. The typical response is to slow down the work that remains and ration it out carefully over a longer period until a stronger backlog builds again.

Individual lawyers have significant control over the pace of the practice and how quickly they address their personal backlog of assignments.

The backlog is an asset

The backlog of assignments is the largest asset in a law firm that eludes centralized management. Effective law firm managers carefully watch accounts receivable and unbilled time. However, in most firms, the value of an assignment is not captured until the work is recorded on a timesheet. Drawing on this unmanaged asset can boost earnings in any economic cycle.

A lawyer taps this asset every day. By doing legal work, the value of the completed task moves from the backlog into unbilled time. To increase profits, the lawyer needs to speed up the pace of the work. This does not mean putting in more time at the office or more time on an assignment than it deserves.

Instead, it means raising the billable yield on the existing workday by completing more tasks and checking off more items on the to-do list. By increasing the throughput of completed assignments, the lawyer can increase the pace at which he or she manages their own backlog.

The Psychological trap

Most professionals fall into an insidious psychological trap during recessionary times. Lawyers are prone to hoard work in their backlog when they are worried about not having enough work to do. They instinctively slow down the work they have in order to make sure they have something productive to do tomorrow or next week.

This is exactly the wrong strategy. It slows down the pace of the practice even more, which makes the lawyer even more nervous about having enough to do, and the cycle reinforces itself. The lawyer may be spending a full day in the office, but his or her productivity may fall significantly as many small slots of potentially productive time become lost or wasted. The result is that profitability falls more than it otherwise would have.

Strategies to increase the pace

There are several concrete strategies a lawyer or a law firm can employ to increase the pace of the practice and draw on the backlog of work:

  • Recognize the psychological trap. The first step is simply to be aware of the natural tendency to slow down work when it appears that there is not enough to do. Consciously recognizing this tendency is the first step in countering the drag it exerts on the economics of the practice.
  • Accelerate internal and external deadlines. It is important for a lawyer to accelerate internal and external deadlines for both him or herself and his or her team. This could be as simple as setting a goal of finishing this week's billable work on Thursday, and starting next week's billable work on Friday.
  • Approach tasks based on time to completion. A savvy lawyer should avoid thinking about when a document is acceptably due back to the client, opposing counsel or the court. Instead, he or she should focus on how long the project should take to complete. If an assignment should take two days to complete, but is not due for 10 days, the lawyer should consider finishing it in two days, and then move on to something else. He or she should not let the assignment drag out over 10 days by completing it in a series of smaller, less efficient blocks of time.
  • Proactively manage associates and support staff. It is good to know how busy the associates and support staff were last week, but it is much better to know how busy the associates and support staff will be next week. Studying productivity reports for a completed time period is a type of archeology: the reports offer data, but there is no way to change the number of hours recorded in the past. By contrast, a good manager monitors the projected levels of busyness for the coming week or month. Where appropriate, a lawyer should get everyone on the team together on Monday mornings to go over assignments for the coming week. This helps ensure everyone is productively engaged by identifying pockets of availability before they occur.
  • Maintain healthy levels of delegation, if possible. When senior lawyers are concerned about not having enough work to stay busy, they are apt to hoard work - to keep billable assignments for themselves and delegate less to associates, paralegals or support staff. Maintaining the pace of delegation is critical to keeping up the pace of the practice. In addition, a senior lawyer has a better shot than does an underutilized junior associate or paralegal at finding other uses for his or her time that the firm will consider productive.

The goal in this process is an incremental change in the way lawyers are spending their time. After all, if a lawyer can manage to pull just two hours of next week's billable work into this week, the effect over a 50-week year, will net an additional 100 hours of recorded time that can be billed and collected. What professional in any practice can look back on the past few weeks and not find a couple of non-billable hours that could have been used more productively?

Additional benefits

There are also ancillary benefits to accelerating the pace of the practice. First, it leads to efficiency. There is truth in the proverb that the most efficient way to get something done is to assign it to a person who is too busy to do it. Attacking assignments in large, contiguous blocks of time rather than letting that work drag out over days leads to a more concentrated and efficient process. This should produce fewer billing write-offs and therefore, higher profitability.

Second, increasing the pace of the practice also leads to better client service. By accelerating deadlines when possible, the lawyer reduces his or her own response time. Although some matters involve intentional delays or rationed fees per month, most matters produce happier clients with faster turnaround time. Additionally, this technique will often lead to more work from the same client as the next phase of the current project or the next new assignment can start that much sooner.

Third, increasing the pace also produces important benefits that are less tangible, but no less real. Most lawyers are happier when they are busy (up to a point). Especially in a recession, conscious efforts to keep the pace of the practice high improve lawyer morale and can improve the mood of the entire office.

Finally, maintaining a brisk tempo in the practice improves the lawyer's ability to work on big new assignments in the future. Most lawyers habituate to a certain level of busyness and build their daily routine around it. A lawyer who formerly recorded 40 hours a week can quickly grow accustomed to recording 30 hours a week during a slow period. When the practice picks up again and 40 hours a week is required, the lawyer used to a slower pace may struggle to get back to his former productivity level, and is much less likely to exceed it.

A real but unfounded fear

The main question we get from our clients is what happens if a lawyer really does accelerate the pace of the practice and completely works off the entire backlog of assignments. In other words, what should a lawyer do if he or she comes up dry?

First, this is not so likely to happen as one may think. Most lawyers find their backlog of assignments is bigger than they originally thought and not so easy to work off completely. In addition, most legal work is iterative: a draft completed earlier triggers a response received earlier. Most lawyers find that new work becomes available through the combined effects of increased client satisfaction, the perception of increased efficiency, and heightened market exposure (from getting more work done).

However, improving the pace of the practice would be a very good idea even if the lawyer completely worked off the backlog and had no further billable assignments. By accelerating the billable assignments and working them in larger, denser chunks of hours, less time throughout the period would be dissipated in small, inefficient increments. One full day with no billable work would surely have more value for marketing or continuing education than the cumulative value of all of the six- and 10-minute increments of non-billable time during the span of the work week. Increasing the pace of the billable work has the benefit of aggregating this non-billable time into larger, more productive blocks.

Take, for example, a lawyer with 30 hours of billable work to complete in the week. The natural tendency would be to spread the work out relatively evenly over a five-day work week, resulting in small blocks of non-billable time each day. A lawyer consciously accelerating his pace would work those 30 hours in the first four days of the week. If no new assignments arose from new or existing clients, that lawyer would find himself with a full day on Friday for productive non-billable activities.

It is much easier to undertake firm marketing activities or develop expertise in an emerging practice area with a large block of time instead of smaller blocks scattered throughout the week. The lawyer could go have coffee with his largest clients, write an article, update the firm's marketing materials, attend a seminar, network, etc.

This earnings improvement strategy applies to almost all lawyers, regardless of the size of their firm or their practice. It is as applicable to a solo practitioner as it is to an individual lawyer within a much larger firm. This strategy also works in almost all fee structures. Lawyers working under alternative fee arrangements typically have at least as much to gain from accelerating the pace of the practice as do lawyers working on straight hourly rates.

Most importantly, this strategy works. Large law firms and practice groups that have embraced this philosophy have experienced significant improvements - often in the range of 5 percent to 10 percent - in the level of busyness and the volume of billable work recorded. In other words, working faster is working smarter and is more profitable.